Risk Management
In light of rapid changes in international climate change policies, and to assess the potential risks and impacts arising from different low-carbon transition pathways, as well as to implement the TCFD’s objective of disclosing climate-related financial impacts, Chailease Holding has collaborated with external consultants to not only identify the materiality of climate change risks and opportunities but also to conduct scenario analysis to understand the potential impacts on the Company’s operations and supply chain under different scenario assumptions, and to assess the Company’s resilience to climate risks based on these findings.
In 2025, Chailease Holding conducted a scenario analysis of key, reasonably quantifiable risks. To comprehensively consider various potential climate scenarios, the Company selected scenarios representing different future pathways to gain a deeper understanding of the range of climate-related risks and opportunities it may face over time, with the aim of assessing the potential severity of these risks.
The assessment of transition risk is based on the parameters of climate change scenarios published by the Network for Greening the Financial System (NGFS), a network of central banks and financial regulators around the world, and the selection of scenarios includes Current Policies, NDCs, and Net Zero. 2050. The World Energy Outlook 2024 scenarios published by the International Energy Agency (IEA) were also used to analyze the exposure to carbon emissions, and the scenarios selected included STEPS, APS, and NZE 2050.
The physical risk assessment is based on the disaster risk maps developed by the Taiwan Climate Change Projection Information and Adaptation Knowledge Platform (TCCIP) of the Ministry of Science and Technology (MOST) as the contextual parameters. The graphs show that we analyzed the future flooding potential of Taiwan through the assessment report 6 (AR6) of the United Nations Intergovernmental Panel on Climate Change (IPCC) with different Global Warming Levels (GWL), SSP1-2.6, SSP5-8.5, and SSP5-8.
Risks of Transformation－Supplier carbon cost shifting
Analysis results:
According to current government regulations, none of our suppliers is subject to carbon fees, so there is no risk of cost shifting due to the imposition of carbon fees. However, considering that the government could adopt a comprehensive carbon levy in the future, we identified a total of 16 key suppliers of modules and inverters for solar power plants procured by Chailease Energy in 2025 and estimate that carbon emissions of the products provided by the suppliers would be approximately 2,472 tons based on the industrial carbon emission coefficients. Due to the advancement of PV process technology, the carbon footprint of the raw materials for the same installation capacity could continue to decrease as technology develops. The company estimates that if the 2025 build-out scale is maintained, the carbon pass-through cost for each scenario in 2030 and 2050 will range from NT$300,000 to NT$440,000.
Risks of Transformation－Corporate Financing Credit Carbon-risk Exposure
Analysis results:
Every year inventory of investment and financing data (including equity investment, corporate bonds, general corporate credit, and auto loans) of Chailease Finance, Fina Finance & Trading in Taiwan, Chailease International Finance Corporation in Mainland China, and Chailease International Leasing Co., Ltd. in Vietnam (including listed and unlisted equities, corporate bonds, corporate loans, and auto loans). The total number of companies that meet the criteria for analysis is 799 according to the five major high-carbon emission industries identified by Chalease in 2025. The company’s corporate clients’ carbon exposure is mainly in the cement industry and the steel industry, with the cement industry being the key exposure industry in scenario 1. As the Company's credit customers are mainly located in Taiwan and China, in scenarios 2 and 3, due to policy changes in China, the carbon price began to grow rapidly, so the company’s exposure to the cement industry showed a significant growth in line with the changes in the carbon price and carbon reduction scenarios.
The impact of carbon exposure on a company is classified into three levels: low, medium, and high according to the expected carbon emission costs and annual operating income of each company. In Scenario 1, the carbon reduction path is not demanding and the carbon price is relatively low, so all companies are in the low impact category. In Scenario 2, the carbon price in the PRC will increase significantly after 2030; and therefore, some companies start to experience medium impact. In the highly transformative scenario 3, due to the carbon reduction path and a significant increase in carbon price, nearly 13.1% of the high carbon emission companies will experience high impact and no medium impact in 2030. By 2050, 80% of high-carbon emitting companies are classified as high-impact, while zero percent fall under the medium impact category.
Physical Risk－Solar power plant flooding potential analysis
Analysis results:
In 2025, the Company has completed grid connection for a total of 4,296 solar power plants, of which 631 are ground-mounted (including floating) solar power installations. We analyzed the flooding risk of solar plants located in villages/towns/cities/districts under SSP1-2.6 and SSP5-8.5 scenarios, and the simulation data classified the flooding hazard and vulnerability into five levels. The areas with hazard × vulnerability ≥ 20 were defined as high risk areas; The areas with hazard × vulnerability ≤ 6 were defined as low-risk zones; values falling between these thresholds are categorized as medium-risk zones. After comparing with the Company’s photovoltaic sites, there are 57 power plants located in high-risk areas under the SSP5-8.5 scenario, with a total installation capacity of approximately 15,400 kW and a total exposure value of approximately NT$6.9 billion. Under the SSP1-2.6 scenario, there is 48 power plants in the high-risk area with a total installation capacity of approximately 13,800 kW and a total exposure value of approximately NT$619 million.
In order to ensure the supply of suppliers, the company also conducts risk impact assessments on suppliers. A total of 6 suppliers were evaluated to be located in high-risk areas under the SSP5-8.5 scenario, accounting for approximately 37.75% of the total procurement value. 5 supplier are located in high-risk areas under the SSP1-2.6 scenario, accounting for approximately 37.04% of the total procurement value. Suppliers are highly replaceable and can we immediately find alternative suppliers in case of a related climate disaster.
In order to reduce the impact of climate risk hazards, all site locations have been adjusted in advance to meet the safest and most flood-resistant engineering options to ensure that even under the most severe climate conditions risk control requirements can be met. Relevant evaluation criteria have been incorporated into the Company’s internal regulations. All sites located on hillsides must pass a soil and water conservation assessment and be reviewed by competent authorities before being built. Site surveys and engineering opinions are required before the construction of a project. The Board of Examiners shall examine the information obtained from the current survey documents and the disaster potential map of the National Science and Technology Center for Disaster Reduction to ensure that site operations will not be affected by abnormal weather.
However, considering that the occurrence of flooding/slope disasters may still cause damage to some panels of the power plant, broken cables and other impacts, which in turn generate related maintenance costs. The estimated impact of flooding risk under SSP5-8.5 scenario is approximately NT$73.52 million. The impact of flooding risk under SSP1-2.6 scenario is approximately NT$66.59 million . In addition, in order to effectively transfer the impact of climate change disaster risk, the Company has taken out product insurance for each power plant and will be compensated 80% of any losses caused by disasters. Based on the defined insured amount, the estimated annual premium—calculated by multiplying the insured amount by the premium rate—is approximately 2.62 million.
Physical Risk－Collateral Flooding Potential Analysis
Analysis results:
The Company reviews the financing cases with physical collateral annually. In 2025, there were 126 financing cases with physical collaterals, and the total loan balance reached NT$5.741 billion. We analyzed the flooding risk of each collateral under base year, SSP1-2.6, SSP5-8.5 scenarios in various villages/towns/cities/areas. The simulations classified the hazard and vulnerability of flooding into five levels and estimated the asset impairment ratio based on the hazard x vulnerability level. Considering that the current valuation results of physical collateral have reflected the climate risk in the base period, cases in which the risk rating has not changed as a result of the simulation are deemed to have no collateral impairment due to climate shocks. A total of 45 loans under the SSP5-8.5 scenario were identified as having potential climate risk expourses, with the exposure amount accounting for approximately 3.54% of the total loan balance. Under the SSP1-2.6 scenario, there were 37 loans with the climate exposure amount accounted for approximately 3.25% of the total loan balance.
To address relevant risks, the Company has systematically integrated physical climate risks into the credit decision-making process. By utilizing valuation haircuts, collateral screening, and risk control mechanisms, we aim to reduce exposure to high-risk assets. Furthermore, in the event of physical disasters that result in significant losses, the Company concurrently assesses the impact on customers' financial standing and potential credit risk to strengthen overall risk management resilience.
Physical risks－Analysis of Flood Risk at Operational Sites
Analysis Results:
This assessment incorporates both inland flood risk and coastal flood risk layers from the database and takes sea-level rise into account to comprehensively evaluate the potential spatial distribution of flooding. If two types of flood hazards occur simultaneously within the same grid cell, the greater of the two flood depth values is used as the maximum flood hazard indicator for that location. Recognizing that results based on a single grid may underestimate the actual risks in the operational environment, this analysis calculates the average flood depth within a radius of approximately 1 kilometer centered on each operational site. This serves as a site-level assessment indicator to reflect the overall flood risk potential in the vicinity of each site.
In terms of climate scenarios, this assessment focuses on 50-year and 100-year flood return periods under the RCP8.5 and RCP4.5 warming scenarios, with 2050 as the primary analysis date, in order to understand the potential impacts of extreme precipitation and flood events on operational sites under medium- to long-term climate change. The flood depths at each location derived from the assessment results were further converted into hazard levels by referring to the flood depth classification standards established by the National Science and Technology Center for Disaster Reduction (NCDR), to facilitate cross-location comparisons and risk management decisions.
The comprehensive assessment results indicate that, under certain scenarios, some operational sites are located in areas with a flood hazard rating of Level 3 or higher (for example, based on a 100-year flood recurrence interval under the RCP8.5 scenario: only four sites in China and one in Thailand). Potential impacts include equipment damage, operational disruptions, and impairment of asset value. Based on the results of this physical risk assessment, Chailease Holding will continue to conduct rolling reviews of flood exposure at high-risk locations and plan corresponding adaptation measures. These measures include strengthening flood protection capabilities at operational sites, improving business continuity plans, and optimizing emergency response mechanisms to mitigate the potential impact of climate change on operational stability.
